S. Klepper, Economics 73-100, Fall 2011
Consider a country that produces two goods, food and clothing. Suppose both goods are produced using only labor, the only productive resource of the country. Assume there are a total of 400 units of labor to produce food and clothing. Suppose that one unit of labor is required to produce each unit of food. One unit of labor is also required to produce the first unit of clothing, but as additional units of clothing are produced, the production of each additional unit requires a greater amount of labor than the prior unit.
Which of the following statements concerning this situation are correct? Mark true for a correct answer and false for an incorrect one and provide explanations for each of your answers.
_____1. The maximum number of units of clothing the country can produce is less than 400.
_____2. As more units of food are produced, the opportunity cost of food does not change.
_____3. The opportunity cost of each unit of food is one unit of clothing.
_____4. The production possibilities curve of the country is concave shaped.
_____5. As more units of clothing are produced, the opportunity cost of successive units of clothing increases.